As Valuations Become Unsure,
Investors Pull Out of Insurers

By

Edited By Hugo Dixon

Updated July 12, 2002 12:01 a.m. ET

In markets where cash flow and transparency are key, insurance firms are out of favor. That partly explains why European life assurers have underperformed a tanking market by 30% this year. Fears about solvency haven't helped, but a core problem is that investors no longer know how to value these businesses.

Insurers make WorldCom's accounts look straightforward. Take traditional approaches, such as embedded value. These recognize that new insurance business involves an immediate cash loss on setup costs and commissions,...